YELLOW

* * * * * * TUESDAY, JULY 15, 2014 ~ VOL. CCLXIV NO. 12 WSJ.com HHHH $2 .00

The race by companies tosidestep U.S. taxes reached a fe-ver pitch as two drug firms un-veiled foreign mergers that willhelp them slash their tax rates.

The moves—by Illinois-basedAbbVie Inc. and Pennsylvania-based Mylan Inc.—show howU.S. drug makers fear being at adisadvantage if they don’t find aforeign merger partner to helpease their tax bills.

AbbVie on Monday was finallyclose to a takeover of Dublin-based Shire PLC for nearly $54billion. And Mylan said it agreedto pay $5.3 billion for AbbottLaboratories’ overseas generic-drugs business.

The tie-ups are the latest inthe growing craze for so-called

Pleaseturntothenextpage

BY LIZ HOFFMANAND HESTER PLUMRIDGE

Race toCut TaxesFuels UrgeToMerge

Egypt made the first seriousdiplomatic move to halt theweeklong air war between Israeland Hamas, offering a detailedcease-fire proposal that wouldtake effect Tuesday and invitingboth sides and the U.S. to Cairofor talks.

A top Israeli official said thecountry’s security cabinet wouldmeet early Tuesday morning todiscuss the Egyptian truce pro-posal. Hamas didn’t agree to theproposal.

The U.S. was consideringsending Secretary of State JohnKerry to Cairo but it looked lesslikely late Monday night, accord-ing to U.S. officials.

The Egyptian proposal callsfor a de-escalation of the fight-ing starting at 9 a.m. local time

in Gaza, with the aim of totalcalm 12 hours later. Israel wouldhalt air and naval bombardmentsof Gaza and refrain from launch-ing a threatened ground offen-sive in exchange for Hamas andother Palestinian factions inGaza holding their rocket fire.

Once violence has stopped,the proposal calls for Israel toopen a border crossing into Gazato allow the movement of goodsand people.

Egypt has mediated before

between Israel and Hamas, nota-bly during battles in 2009 and2012. But it has been slow tojoin diplomatic efforts this timearound because the current mili-tary-backed administration inCairo views Hamas as an Isla-mist enemy linked to the MuslimBrotherhood. It is unclearwhether Cairo can bring Hamasto a negotiating table.

On Monday, missiles from Is-rael and rockets from Gaza con-tinued unabated with 163 Israeli

airstrikes and 115 rocketslaunched from Gaza, accordingto the Israeli military.

Late at night after the Egyp-tian proposal came out, IsraelRadio reported that Israel at-tacked the house of the No. 2 inHamas’s military wing, the Qas-sam Brigades, and there weremany casualties.

Hamas said the house was hitseven times with warning rock-ets then blasted with a missile

PleaseturntopageA7

By JoshuaMitnick in TelAviv,Tamer El-Ghobashyin Jerusalem andNicholas

Casey in Gaza City

Egypt Tries to Broker Mideast TruceNo Agreement Yet on Proposed Cease-Fire; Rockets From Gaza and Israeli Airstrikes Continue

WASHINGTON—As the seedsof the financial crisis were be-ing sown, a Citigroup Inc.trader sent an internal emailwarning about the poor qualityof mortgages the bank waspackaging into securities andselling to investors.

“We should start praying,”the trader wrote in the email.

On Monday, the bank agreedto pay $7 billion, including a $4billion civil penalty to the Jus-tice Department, $500 millionto the Federal Deposit Insur-ance Corp. and several statesand $2.5 billion earmarked for“consumer relief,” to settle theU.S. government’s allegations itknowingly sold shoddy mort-

gages ahead of the crisis.The settlement doesn’t ab-

solve Citigroup or its employ-ees of facing any possiblecriminal charges, AttorneyGeneral Eric Holder said. Hedeclined to say whether thegovernment was pursuingcriminal charges.

Citigroup, in a statement offacts, admitted to repeatedlybrushing aside warnings fromboth inside and outside thebank that many of the loans ithad packaged had serious prob-lems and concealing that infor-mation from investors.

Mr. Holder said the bank soldmortgage-backed securities

PleaseturntopageA12

BY ANDREW GROSSMANAND CHRISTINA REXRODE

Citi to Pay $7 BillionTo Settle Loan Probe

Salvaged From the Sea, Headed to the Scrapheap

AlessandroBianchi/Re

uters

At a recent meeting of the Os-ceola County, Fla., board of com-missioners, many attendeesbowed their heads in silence asthey listened to an invocationdelivered by an atheist.

“Habit, I guess,” says DavidWilliamson of Central FloridaFreethought Community, who, inlieu of calling on the almighty,invoked the spirit of goodwillduring his roughly one-minutespeech.

Mr. Williamson, the first non-believer invited to perform thecounty ritual, is among a handfulof atheists around the countrywho have given or are scheduledto give invocations before local-government meetings. Thespeeches have championed self-government, the human condi-

tion, intellectual openness andminority viewpoints.

At the same time, severaltown boards that had done awaywith prayers that include refer-ences to specific faiths are try-ing to revive them.

The groundswell is a reactionto a U.S. Supreme Court ruling in

May that sanctioned prayers be-fore meetings of the town boardin Greece, N.Y. The court rejectedarguments that the overwhelm-ingly Christian prayers gavepreference to one faith and vio-lated the First Amendment,which prohibits the governmentfrom establishing an official reli-gion.

The decision was a blow tononbeliever activists, but it alsocreated an opportunity. JusticeAnthony Kennedy, who wrotethe 5-4 ruling, emphasized theimportance of inclusion, holdingthe town to a policy that permits“a minister or layperson of anypersuasion, including an athe-ist,” to give the invocation.

And so on June 16, Mr. Wil-liamson, who lives outside Or-lando, found himself for the first

PleaseturntopageA12

BY JOE PALAZZOLO

Supreme Court Ruling Gives Atheists a Prayeri i i

Nonbelievers’ Public Invocations Praised; Next Up, Pastafarians

RUSTING HULK: Crews began refloating the Costa Concordia Monday at the Italian island where it ran aground in 2012, preparing it to be scrapped.

DJIA 17055.42 À 111.61 0.7% NASDAQ 4440.42 À 0.6% NIKKEI 15296.82 À 0.9% STOXX600 339.79 À 0.9% 10-YR. TREAS. g 8/32 , yield 2.548% OIL $100.91 À $0.08 GOLD $1,306.30 g $30.70 EURO $1.3619 YEN 101.54

TODAY IN PERSONAL JOURNAL

The Meanest StingersPLUS Make Up After a Fight

CONTENTSCFO Journal..................B4Corp. News................B2-3Global Finance.............C3Health...........................D1-4Heard on Street..........C8In the Markets.............C4

Leisure & Arts.............D5Marketplace..................B6Opinion....................A13-15Sports................................D6U.S. News...................A2-4Weather Watch..........B6World News...........A6-12

s Copyright 2014 Dow Jones & Company.All Rights Reserved

>

What’sNews

i i i

World-Widen Egypt proposed a cease-firebetween Israel and Hamas andinvited both sides to Cairo fortalks. Israeli officials will dis-cuss the plan early Tuesday. A1nHezbollah has started re-cruiting fighters in Syria andbringing in fresh forces toshore up the Assad regime. A6n The U.N. Security Councilvoted unanimously to deliveraid to Syria without the ap-proval of Damascus. A6n California is set to imposemandatory water restrictionsfor the first time amid one ofthe state’s worst droughts. A2n Iran has signaled for thefirst time that it is willing toaccept modest reductions innuclear enrichment. A7nUkraine said a rocket prob-ably fired from Russia downeda Ukrainian military cargoplane close to the border. A8n Bergdahl is returning toregular duty at a base in Texasafter five years as a Talibancaptive, the Army said. A4n Combating cybercrimewillbe a priority, the new head ofthe Justice Department’scriminal division said. A3nThe head of theWorld Cup’shospitality provider, accusedof supplying tickets to scalp-ers, turned himself in. A7nChina’s territorial claimscould lead to war, majorities inmany Asian nations fear. A11n The U.N. said it is tempo-rarily withdrawing its stafffrom Libya amid clashes. A7n Died: Nadine Gordimer,90, South African novelistand apartheid opponent. A8

i i i

Citigroup agreed to pay$7 billion to settle gov-

ernment allegations it know-ingly sold shoddy mortgagesahead of the financial crisis. A1The Dow climbed 111.61points to 17055.42, helped by abetter-than-expected earningsreport from Citigroup. C1nAbbVie neared a deal forIreland’s Shire andMylanagreed to buy Abbott’s foreigngenerics unit as the U.S. drugfirms seek to cut their taxes. A1n Strains persist at Pimco be-tween founder Gross and topexecutives as clients continueto leave the bond fund. A1n China’s big banks haltedan experimental program thathelped people transfer largesums of money abroad. C1nAIG’s incoming chiefwill geta small pay boost but standsto earn much more if the in-surer continues to recover. C1n The NBA is seeking to dou-ble the TV-rights fees it re-ceives from ESPN majorityowner Disney and Turner. B1nMerck’s effort to revive itsZilmax cattle-feed additive isstalling amid resistance frombig beef processors. B1n Pilot agreed to pay $92 mil-lion to settle a probe over al-leged fuel-rebate skimming. B6nThe EPA proposed that automakers be required to roadtest their mileage claims. B1n Fox is combining its broad-cast unit and TV studio underthe same leadership team. B5n The Justice Department isprobing possible price coordi-nation by music publishers. B2

Business&Finance

Sgt. Bergdahl Returns to Duty

NEW POST: After being held prisoner by the Taliban for five years, ArmySgt. Bowe Bergdahl, shown in an undated photo, has been assigned toadministrative duty in Texas, following a ‘reintegration process.’ A4

U.S.A

rmy/Re

uters

NEWPORT BEACH, Calif.—In early June, beforehundreds of employees at Pacific Investment Man-agement Co.’s new 21-story headquarters here, ChiefExecutive Douglas Hodge spoke effusively about BillGross’s enduring passion for investing.

“Forty-three years ago, he founded Pimco with avision and a fire in his belly, and we are living thatvision today,” Mr. Hodge said, with the 70-year-oldMr. Gross, the firm’s chief investment officer, stand-ing beside him. “We all owe so much. Thank you.”

Employees gave Mr. Gross a standing ovation. Thetwo executives shook hands, almost hugging, accord-ing to people in attendance. It was a show of warmthat the bond giant known for its high-pressure envi-ronment and a display of unity amid a closelywatched leadership transition.

Behind the scenes, however, strains persist more

than six months after the abrupt January resignationof Pimco’s previous CEO, Mohamed El-Erian, accord-ing to people familiar with the matter.

About three months ago, a group of Pimco seniorexecutives became so concerned about Mr. Gross’sdealings with the media that they warned him tostop making public comments they viewed as divi-sive, according to people familiar with the matter.Mr. Gross, the face of a firm that manages $1.97 tril-lion and its star investor, has threatened to quit morethan once since Mr. El-Erian’s March departure, in-cluding after that warning, the people say.

A key reason for the tension: Clients continue toleave Pimco and, in particular, Mr. Gross’s fund. HisTotal Return fund, the world’s largest bond fund, saw$4.5 billion of net investor outflows in June—its 14thconsecutive month of defections—despite outpacingtwo-thirds of it rivals in the second quarter, accord-

PleaseturntopageA12

BY GREGORY ZUCKERMAN AND KIRSTEN GRIND

INSIDE PIMCO

ABond Giant and Its FounderStruggle to Heal Strains

Gauging the U.S. revenue hit... A2 Heard: AbbVie opens wallet... C8

Citi earnings help lift stocks... C1 Heard: The bank’s paradox...... C8

CM Y K CompositeCompositeMAGENTA CYAN BLACK

P2JW196000-6-A00100-1--------XA CL,CN,CX,DL,DM,DX,EE,EU,FL,HO,KC,MW,NC,NE,NY,PH,PN,RM,SA,SC,SL,SW,TU,WB,WEBG,BM,BP,CC,CH,CK,CP,CT,DN,DR,FW,HL,HW,KS,LA,LG,LK,MI,ML,NM,PA,PI,PV,TD,TS,UT,WO

P2JW196000-6-A00100-1--------XA